Woolworths' collapse means a merrier Christmas for its high-street rivals

On a Wednesday night in late November last year, the directors of one of the high street's biggest retailers gathered sombrely in their boardroom. After exhaustive negotiations with lenders owed £385m, they were finally forced to admit defeat and formally called in the administrators. After almost 100 years, and despite an eleventh-hour intervention by officials representing business secretary Lord Mandelson, Woolworths collapsed and 30,000 jobs were lost.

Twelve months on, the wonder of Woolies' is that its demise actually provided a substantial boost to many rival retailers. High streets around Britain will look a little different this Christmas without the chain famous for selling everything from Pyrex dishes to pick 'n' mix sweets, but it has probably helped many smaller retailers survive.

Woolworths may have been, in its final years, one of the worst store chains on the high street – dire shops full of goods almost always available better or cheaper elsewhere. It may have been losing shedloads of money – £100m in just six months last year – but it was still a big business. With £2bn of sales, it was the UK's eighth-biggest retailer.

It also had leading positions in several markets. It was No 1 in sweets and chocolate and the second-biggest retailer of entertainment and of toys, behind HMV and Argos respectively. It was fourth in homewares and fifth in children's clothing.

Rival retailers in those sectors have been major beneficiaries from Woolies' collapse. Argos, part of the Home Retail Group, has had a difficult 2009 with declining like-for-like sales. But the retailer's chief executive Terry Duddy has admitted the catalogue shop chain has received a big boost from a leap in toy sales directly attributable to the disappearance of Woolies. Duddy snapped up Woolworth's Chad Valley toy brand within weeks of the collapse for just £5m and relaunched the range in the summer.

This month, The Entertainer, a privately-owned 49-store toy chain, set out plans to double in size to fill the toy retailing gap on the high street it believes now exists.

Gary Grant, The Entertainer's founder and managing director, who is also chairman of the Toy Retailers' Association, recently said: "The demise of Woolies has presented the biggest opportunity I've ever experienced in all my years in the toy business. Business has picked up in all our stores. We have had to rent outside warehouse space to cope".

He added that he was "very optimistic" that this Christmas would prove far better for retailers than last, when they were up against the Woolies' clearance.

Andy Bond, chief executive of Asda, says the supermarket has gained this year by soaking up former Woolworth's trade. But he pointed out that the variety store's demise at first caused big problems. When Woolies went bust last November, so did one of its sister companies, EUK, a distributor of music, books and DVDs, which supplied supermarkets including Sainsbury Morrison and Asda. "It was really difficult at first," said the Asda boss. "We had gaps on our shelves last year because of EUK. Our staff did sterling work to create a new supply chain."

Now, however, Asda, like other retailers, is seeing the upside. Bond says that a toy promotion held in October generated "a dramatic increase in sales on a year ago. On music, games and videos we've definitely benefited. We have doubled our share of the games market." He points out that Asda has also recruited hundreds of former Woolies' workers.

The Shop Direct group, which bought both the Woolworths' brand name and its Ladybird children's clothing label from the administrators, has also been a beneficiary. Formerly known as Littlewoods and part of the billionaire Barclay brothers' business empire, Shop Direct relaunched Woolworths as a web-only business in July, selling everything the variety store was once famous for, including fancy-dress outfits, entertainment goods, the Ladybird range and even pick 'n' mix, rebranded as click 'n' mix. So far, said Shop Direct it has had 8m hits.

HMV, one of the top-performing shop groups in the past 12 months, was able to cash in not only on the demise of Woolies but also of entertainment chain Zavvi, which collapsed just a few weeks later. The company said recently that it had been "working hard to maximise the market share opportunity that has arisen from the withdrawal of competitors". Its like-for-like sales and profits are well up on a year ago.

Other beneficiaries have included those chains that have been able to move into Woolworths old stores – none of which was owned by the retailer. By August, according to property consultants CBRE, more than 60% of the 800-strong portfolio had been re-let or was under offer, despite the difficult conditions on the high street. Of those formally now let, about 110 had been taken by grocers, led by Iceland and Tesco. Another 53 had become fashion stores, with New Look and Peacocks taking most units, and 23 are now occupied by homeware retailers.

However, the biggest tranche – some 134 shops – had been taken by discount outlets, led by 99p Stores and Poundland, retailers selling much the same stuff that Woolies always offered, but better.